Halozyme Therapeutics, Inc. (HALO) September 2026 Conference Transcript

thank you very much for joining us for this afternoon session today my name is Mohit Bansal I'm one of the fire tech and pharma analysts at Wells Fargo and I'm joined by once again with Helen Tolley the CEO of Helozyne with us thank you very much for your continued support I have been hosting you for five years in a row thank you very much for joining us today it's great very excited to be here in Boston thank you and I was looking at the stock chart stock is up 40% in last one year 50% year to date and much of it is in last three months. So you have done an amazing job in last one year doing all those deals and building the platform. Can you talk a little bit about the journeys with these deals and all and how do you see the future of Halozyme beyond the enhanced platform at this point?

That's great. Well for those less familiar with Halozyme we focus on subcutaneous drug delivery and we have four subcutaneous delivery technologies now. The first and the largest to date is Enhance and we also have an auto injector platform as well. At the end of last year we acquired two hyper concentration technologies Hypercon and Surfbio and what we are hoping to do is create each of these into a compounding platform engine for Halozyme. As Mohit says we're just coming off a record quarter in the second quarter. Revenues of $481 million, up 48%. Royalties, importantly, up 50% to over $300 million. And the drivers of that today is Enhance. We've got two key drivers within our Enhance platform are products that launched in 2020 and 2023. That's Darzolex Subcutaneous and Vivecart Hytrulo. Now, even although those launched several years ago, they are showing phenomenal growth. They're terrific products where the companies have got new indications, they're expanding to new prescribers, and we're getting the benefit of longer duration of therapy and some of these indications as well. So that is going to be a continued growth driver for Halozyme. But what we reported in the second quarter, and I think what got people very excited, was that the next set of launches which occurred more recently, which includes Ocrevus subcutaneous plus Opdivo and Riborant subcutaneous. Those grew 80% sequentially. And those are becoming more important royalty revenue drivers for Halozyme, driving that record performance. And we're not done there. Talking about where we're going, we have 13 products that we project will be in the clinic within hands by the end of this year. We will have two HyperCon products in clinical testing at the beginning of next year. And as Mohit mentioned, this year we've signed five new deals to date, three in hands, two with HyperCon, which are expanding us into new areas, including ADCs and nucleic acids. That is what is leading to this continuous engine of new products in the clinic that will be our future royalty revenue streams layering on top of the two drivers I already talked about. So an incredibly exciting time. And our future will be multiple ones of these compounding platform engines just driving durable, long-term royalty revenue growth for Haleazine.

Got it. Very helpful. Thank you for that. And then let's talk a little bit about these deals. Like, I mean, these deals happen quite in a cluster where, you know, like three of those enhanced deals and two hyper-con deals. Was there a trigger there or this is always in the making and then it's just that it got executed in the last six months or so?

Yeah, and I'll add we did five this year, but we actually signed three enhanced deals in December as well. So it's been an amazing month. It's a record performance in the history of Halozyme. What I think has happened, Mohit, is that this is the time for sub-Q therapy. There is a recognition that we find broadly across pharma and biotech that to be competitive, to deliver against the patient expectations, you need to have sub-Q delivery, ideally in the patient's home, ideally in some indications in a small volume autoinjector. And when we look at the types of products that are in development today, there is a high concentration of immunology and inflammation, nephrology, GI, neurology. And these are disease areas where the goal of pharma companies, but also of the patients, is I want to be able to treat myself at home. I don't want to have to visit the doctor's office. I don't want to sit in an infusion suite. And so we happen to be at a marvelous time where sub-Q therapy is the expectation. And HaleAzyme has the leading technologies. Within HANS, we have the best proven, best validated sub-Q technology. But our HyperCon and Surf biotechnologies are delivering against this desire to have small volume in an auto-injector at home. That's a volume proposition. And that's what we've seen just a total change. And before HaleAzyme having to go out and talk to people about sub-Q delivery, have you considered it? To companies calling us and saying, we want HANS because we want to do X. We want hypercon because we want to do X. And so it is this recognition that sub-Q delivery is, frankly, a commercial mandate in these additional disease areas. There's still an interest in oncology, but what we've done is expanded to multiple different areas and multiple different modalities. We're not just working with antibodies today. We're beginning to work with ADCs.

We're working with nucleic acids. all of this is beginning to expand our time and that's all what's driving this you know flurry of deals and it's going to continue we've said we're going to sign at least one additional deal this year this is interesting so basically if I understand correctly and correct me if I'm wrong so basically what you're saying is that earlier like at least for the initial launches for for pharma companies it was more of a defensive strategy to launch a sub queue but it seems like now it is an offensive strategy or maybe expansion strategy that we are not just protecting the business we are like with a sub-q delivery in those immunology or nephrology indications the product could be much bigger than it would be without a sub-q delivery.

You hit on great points and I'll just use two examples that I think have opened up people's recognition that the sub-q therapy grows the market. So Darzolex is a terrific example. When we started working with J&G, it was a four to six hour IV infusion. Cerclissa was being developed and that was a two hour IV infusion. So J&G wanted to have a more convenient therapy for patients and went with our delivery, which is a three minute sub-queue versus these hours in the infusion suite. Massive difference for patients. But what that also did was allow them to penetrate more rapidly and more deeply into frontline patients. Now, why is that important? The frontline population is the biggest population in multiple myeloma, but it's also the population who stay on therapy for the longest. And so that's why we're seeing this amazing growth. It's a large population, but it's also compounding because year after year, patients are repeating their prescriptions. ViveGart is another example. So ViveGart Hytrulo, I'm sure many of you know, ViveGart launched in Myasthenia Gravis as an IV. It then launched a sub-Q in a vial that the patient had to pull up. It was a great advance for patients, but it took a lot of steps and it took a number of minutes for the patients to do. In the middle of last year, they launched a pre-filled syringe, 5ml pre-filled syringe that the patient self-administers at home in just 20 seconds. That has led to exponential growth, ViveGart delivering 1.5 billion in the quarter, 60% year-over-year growth, and that growth really driven by the pre-filled syringe. And what Ergenics has talked about is new prescribers are able to prescribe because not all immunologists or rheumatologists have IV infusion capacity. Patients are starting therapy much earlier in the disease because it's easier for the physician to do. So exactly to your point, Mohit, this is just people recognize that, yes, it's the best offering for patients, but for the companies, that obviously gives them competitive mode. But the addition to grow the product into new treatment settings, such as the community hospitals or the physician office or home, as well as expanding to new populations, is all what we're hearing from partners, what they want to capture. They want what the J&J has with Darzalex. They want what Argenix has with ViveGuard.

Completely makes sense. So to that extent, so the three enhanced deals this year and a couple of them last year, is this a mix of defensive plus offensive? Like how would you correct? Because you cannot disclose the assets, but again, can you talk a little bit about that?

I think a common theme is the best competitive profile to get the best market share possible and the best growth. So, you know, that all kind of delivers for the company. The patient is a winner in all of this by having a more convenient therapy, but the companies are winning. So, you know, if you want to launch into a market today like asthma or inflammatory skin disease, you want to have a less frequent auto injector at home, as an example. That would be the hyper con. But for the enhanced ones, you know, one of the most exciting deals, I think, is with GSK. It's interesting. That is where they're going to be using enhanced to see if with their ADCs, they can reduce the C max. So the peak concentration in the blood versus the IV. Why is that important? Well, there can be some toxicities associated with a high C max. And so with enhanced sub-Q, because it's absorbed more slowly, you get the same exposure, so the same efficacy is the theory, but less of the peak, so less toxicity. So that could enhance the competitive profile of their ADCs so they can get greater market share. So that is the common theme here. It's a win-win, and that competitiveness can allow greater expansion into the new populations, et cetera. So we are not simply a convenience play. We are a market growth driver for these companies.

Clearly, like ViveGuard is probably the best example of that. I mean, like the product wouldn't have been as big without this kind of offering there. Super helpful. And to what extent clarity on IRA has played a role here?

Yeah, the IRA has been, you know, a little bit of a question for our investors. I will say pharma and biotech have paid no attention to the question as to whether a co-formulated product within hands would or would not be bundled with the lead product because they're coming to us for competitive differentiation. So it was never an accelerator of business for us. And so we actually are just pleased that with the last guidance, it seems like it's still draft guidance, but it'll be finalized. It's clarified for people to say, all right, there's no upside. But we also can say because of the IRA and the one big, beautiful bill, there's also minimal to no impact of the IRA to Halenzymes Resinue. So it's in the rearview mirror. We're not talking about it anymore. And I'm really thrilled about that because it just got undue prominence for its potential impact at any point in time. But I think that's clear now. And we seldom get questions on it.

No, definitely.

From investors. Never from pharma or biotech.

No, we are a nervous group of people. Super helpful. So you have had many new launches in the last couple of years. So Okreverse, RoboVent, Opdivo, Decentric. How would you characterize how well your partners have performed on the execution of those products, especially Okreverse? I mean, Roche was talking about this being a defensive product, but they are doing really well, actually. They are trying to protect the market from the competition, but now they are actually growing this business. So talk a little bit about that.

And that has been the upside surprise for last couple of quarters so can you talk a little bit about that yeah i mean obviously our partners have all performed very well and um just the three products you were talking about there mohet um for obdivo ocrevis and ribavance sub q that's the group that grew 80 percent quarter over quarter each product's a little bit different um in in terms of what drove that so um if you will i'll just spend a moment on them so for ocrevis um sub q um the value proposition there is the patient can have a multi-hour IV infusion or they can have a 10-minute sub-queue. So enormously positive. Now, what Roche had said at the time of launch is that the availability of the sub-queue because of the time and because you don't need IV infrastructure, it would expand access. It would allow more patients to be treated because you could be treated in a community hospital as opposed to an academic hospital, the doctor's office, and there'd be higher patient throughput. And so they put a number in that and said that the total potential of Ocrevus IV and sub-Q would increase to 9 billion with 2 billion Swiss francs being just due to the sub-Q expansion. I think some people thought that meant that they weren't going to expand and convert the IV and that's not what's happened. After the launch about 50% of patients who are on the sub-Q Ocrevus are coming from IV switches but 50% are new and so they're getting the double benefit of expanding the market while giving the patient a better treatment experience and so we believe that entire nine billion Swiss francs is the addressable market for Ocrevus some sub Q they grew from seventeen thousand five hundred patients in the fourth quarter to forty four thousand patients on therapy in the second quarter so phenomenal growth we're going to continue to see that very nicely so great launch and then I would just think differently about what the whole TAM is for Ocrevus sub Q to include those IV patients as well if we turn to ribavent sub Q now that that is a product the IV is six to seven hours it has a high rate of infusion related reactions that limited its uptake the conversion to sub Q is a five minute injection, and it has a five-fold lesser rate of infusion-related reactions. It is a game-changer for the adoption of Ribrovant Sub-Q. And so J&J did talk in the quarter about the growth was up 60% driven by the availability of Ribrovant Sub-Q. That is a product that just got its J-code on July 1st. So we're going to see improved uptake in the US in the next quarters now that the reimbursement is in place. They got priority review for head and neck cancer, so a new indication coming forward, and potentially data in the future in colorectal cancer. So we're very excited about that launch. And, you know, I think you're going to see with J&J, them doing exactly what they've done with Darzolex, just keep investing in great new indications because it's fabulous science, and we're going to benefit from that. And a word in Updivo. Updivo is converting. They were about 15% conversion. They feel they'll get to 30% to 40% conversion. I think they might beat that just based on the pace that they're on. But very nice conversion there. So it speaks to our partners. The sub-Q is a part of their future. It's part of how they're driving revenue for the company. We're integral, not just an afterthought. So we're finding the execution is aligning to their strategic intent, which is to drive more revenues for the company.

Very helpful. Thank you for that. I think the other aspect is that, so you have talked about 13 additional enhanced launches starting 2029.

That's a lot. so are the economics with the newer deals any different from the previous one because at least like the the the mechanism always had built-in mechanism for like if there's no patent there's a lower royalty so probably not but would love to understand that yeah happy to talk about that and what we have talked about is based on the number of products we expect to be in development for enhanced by the end of this year it would be up to 13 up to 13 launches beginning in 29 and running through about 2030 to 33. I'll just highlight in addition to that we're going to have HyperCon launches with the first two HyperCon launches potentially in the early 2030s as well. And we're going to keep adding to that with the new deals that we're signing. We've got new partners moving into the clinic this year and next year that is going to further expand that. In signing the new deals, historically we've signed a lot of exclusive deals. We now have more of a mix on in the hands of exclusive and non-exclusive deals and what's very exciting is that we've continued to be able to get included in those deals very attractive long-term durable royalties minimum of 10 years potentially longer with co-form patents and in almost every case there is the potential in these contracts to earn the mid-single-digit royalties towards the lower end of our range but but still mid-single-digit royalties and we've been changing the structure of these, Mohit, that there isn't necessarily always a 50% step down. It can be a smaller step down because we're starting lower and going up. So very attractive economics on in hands. If I turn to HyperCon, that's where we are very excited to have signed five HyperCon deals so far. You'll recognize the companies we're working with. They're terrific companies, J&J, Lilly, Argenix, Vertex, and Oruka. In that instance, it's the same structure overall where we get milestones and in that instance all of these are mid single digit royalty deals they start and stay in the mid single digits and so very attractive royalties in that as well and each of these is going to expand each of these will be separate royalty streams and this is why we love the phrase of the the compounding out platform engine you know years ago people few years ago we're very focused on Darzal X what's happening this growth that we're seeing now is really driven by the fact that on Enhance, we have six royalty streams that have got significant growth already and will continue to grow. Same is going to happen in HyperCon.

Diversification. Perfect. I have to ask one Darzelex question, though. Sorry. I want to talk about everything else as well. So is there any update on the U.S. patentry issue for Darzalex here, and I think the question we get a lot is that 2029 to 32, and then beyond that, how should we think about Darzalex at this point?

Yeah, for the specific Darzalex, just to say, this is a reissue patent of a manufacturing patent that would have the effect of maintaining our royalty rate on Darzalex at the mid-single-digit royalty rate between September 2027, which is when, in our projections, we currently step down, and it would move out to step down in March of 2029. We applied for that several years ago. It is still undergoing the prosecution and appeal process. It did take a while for it to get assigned an examiner, but we are confident that it will complete before the September 2027 date and result in a patent for halocyme that we believe, as we go and talk to J&J, they will agree will have the effect of stopping that step down we've done this once before with a European reissue patent so the strategy has proven successful but we still have to wait to get that answer Mohi you know you asked the question of 2029 you've heard about the great growth that we're seeing with our current portfolio you've heard about all of these products that we have in development as well you know we're very comfortable to have put out multi-year guidance to 2028 that is all based on de-risked royalty streams and we will continue as we get concrete data and can model any additional royalty streams providing updates on that but we we feel very strongly that we want you to have confidence in the projections we put out and so we do have a a bar that is we want it to be very clear to you that you can model it and confidently because it is de-risked and the assumptions are clear so we're working on that but we can't give any confidence yet that when we'll be in a position to provide more details awesome so let's

just talk about hypercon for a little bit so again so I mean in terms of economics for the deals that you have done with hypercon or done by the previous management team is enhanced a reasonable framework or or there are different economic models no very similar economic models and they'll be very similar development paths as well each of them is structured with an upfront payment milestones for progress through development and commercial accomplishments and then in the case of them hypercon very similar to our very

early enhanced agreements for exclusive deals and all of the hypercon ones today just about our exclusive in that mid single-digit dump royalty space and so you know we can expect to earn milestones as the partners progress into the clinic and through commercial as well as receiving that mid single-digit royalty and our estimates of development timeline is in the three to five year time frame depending on what kind of product we're talking about so So that would be very similar to Enhance as well.

Very helpful. And where are you in terms of starting those two trials in the first half of 27? And then some people argue that's probably the manufacturing part that you have to figure out before you move in. What is the bottleneck right now for you?

Yes, the Hypercon technology is a novel technology. That's one of the reasons we were so excited about it. It uses a patented dehydration process to be able to create antibodies. Instead of having a maximal concentration, if you like, of 150 milligrams per ml, it allows up to 500 milligrams per ml while still preserving easy injectability for the product. It doesn't get so thick you can't inject it. So the benefit of that is obviously that the volume reduces by whatever the factor of concentration is for the product. We partnered with Thermo Fisher Pathion on the manufacturing process for clinical studies. And that is now very well underway. I visited there recently, and it's a very impressive site and a very impressive process. We expect to move into the clinical study manufacture of two partner products in the fourth quarter and the beginning of next year. And that is one of the last steps that we need to do to be ready to enable the phase one study starts for two products in the first half of 2027. So everything going very much according to that plan and partners getting ready for these phase one starts for two very exciting products.

Got it.

Can you comment on like, so there are some questions about hyper scalability for the commercial supply eventually. like can you talk a little bit about the complexity level of this manufacturing and and how comfortable do you feel within your due diligence about the scalability eventually for the commercial supply yeah we felt very comfortable in the scalability there's a great team at Hypergon who have invented and scaled this up initially in a lab here in Boston but has now done it successfully in the Thermo Fisher site in Italy. And this is clinical scale. So because we've seen such interest with five deals signed, we actually believe to maximize the value of this opportunity, we want to provide partners with a comprehensive solution. And so our thinking at the moment is that we're going to invest in manufacturing scale-up to be able to go from drug substance all the way through fill finish and make it really turnkey for our partners in terms of them being able to access and use the HyperCon technology. That will take some investment. We haven't finalized yet the timing of that investment and where it is, but we do believe to truly reap the benefits of the demand we're seeing for this technology, that's going to be an accelerator. And I will say an additional benefit of Halozyme doing it is we continue to innovate we continue to get new ideas that we are able to our novel findings that we're able to patent so we're increasing the competitive moat both from a new IP but also from a know-how and so it's a it's a very important part of our strategy as to how we're going to create Hypercon into this compounding platform engine that delivers for 20 years just as Enhance has done.

Got it very very helpful so in terms of partnership the the the partnerships for hypercon the the framework is pretty much similar to enhance in terms of like talk about the timelines it takes for concept to clinic is it any different from enhanced look so there's different still in early technology different paths that was the first time when you did then yeah exactly yeah Exactly.

And that took a very long time. So it's a very partner dependent. There are partners who want to do the feasibility testing to show that their molecule can be concentrated and can be stable before they will move forward to a clinical agreement. So that takes a period of months to be able to do that. There's other partners who are very comfortable signing the deal and going straight into development. And that's where we work with them very closely to develop the hyper-concentrated formula, put it on stability, and then be ready to take it through and make the actual clinical supplies of it. So it's initially definitely going to be a bit slower than Enhance today. For Enhance today, we can determine if a product is compatible with Enhance in four weeks. And we've got lots of data so there's still a little bit because we have to develop the new formulation then we need to scale up but that's going to reduce some I think very nicely over time as we get more and more experience with it so you know it's it's it's we're starting off with these two new phase ones we expect actually additional phase ones in the second half of 2027 already based on what's ongoing in the clinic and we have a very nice pipeline of feasibility ongoing at the moment that can be our future agreement. So interest in HyperCon is incredibly, incredibly high at Mohit. So we've already started a very exciting pipeline there.

We are also interested in learning which products are going in. So when do we learn that when they enter the clinic, that's contractually you cannot disclose, right?

Yeah, the two first products that will enter the clinic, if they're in patient populations, will be posted on clinicaltrials.gov. Obviously, if they are in non-patient populations like human volunteers, they don't get posted. And so we can't say at the moment exactly what's going to happen. But I would keep your eyes on clinicaltrials.gov and in the first half of next year to be able to see what these products are. But as I mentioned, there's more products coming. So it's a very nice already early pipeline.

Got it. No, definitely. AI can help us there. So talking about Merck litigation a little bit here. So where do you stand now? And you have talked about PGR is not be all and all. It will be a little bit longer process than just PGR. So talk a little bit about that. I mean, you have a lot of patents. You have a good patent estate. So talk a little bit about where you are.

Yeah, let me start by just contextualizing. Where the Merck litigation is focused is on a patent portfolio we have that's called the MDays, the Modified Hyaluronidase Portfolio. That is entirely separate and independent from Enhanced. So we do not actually license MDays to anyone. All that we've licensed to partners is Enhanced. And really importantly, anything that happens on MDays can have no read through to Enhanced because they're so separate. I'd also say this MDays litigation, it's all upside as a result of that. So think about it. It's a little bit of an option for a license with Merck. Should we prevail in the ultimate litigation?

For the small product.

Exactly. So we look at this as a very positive potential upside with no downside. That's my most important message. There is no downside there. So we approached Merck when they had started to make progress with using the LTAG and modified hyaluronidase to take a license. We believe they're infringing. They did not take a license then, and so we moved to sue them in district court for trying to get basically damages as well as a permanent injunction ultimately. What has happened is that Merck has challenged some of our patents in the PTAB, and that process has been ongoing throughout this year. The timing of the start of the district court is going to be tied to the final resolution. Now, all of those actions are happening in the PTAB, and so the whole infringement and settlement can only happen with the district court, but we've got to get through this process that is happening in PTAB. And so I'd say no matter what happens this year, I think Merck will probably appeal some of it. We will probably appeal some of it. So that's going to go on for a period of time. So resolution in the U.S. is going to take a number of years because we need to get the start of the district court case and then we need to get to the end of it. So we'll keep you updated on that, but that is still a very active area. Yeah. Where at one point your attention is outside the U.S., where we have gained a preliminary injunction that has prevented Merck from launching QLEX in Germany. In October, we will get the readout from the Netherlands, where we had a similar request to prevent Merck from being able to launch in the Netherlands. But importantly, because that's a license holder for Merck in Europe, it will affect multiple European countries. Now, what we hope is if we are successful with that, that will bring Merck to the negotiation table. But we will see if they are willing and open to do that. And there's other measures going on in Europe that I think will be very interesting for investors to watch. But again, all upside, no read-through on the hands.

Got it. Very helpful. So the last question is for your CFO. But again, let's see if you can imitate him. So the question is, like, so, I mean, Enhanced Platform has been producing a lot of cash here. So for capital allocation between share repurchases, BD, what is your priority right now at this point?

Yeah, we're going to continue with the disciplined approach that we have traditionally used with our capital allocation. Mohit, we are in the great position because we have very strong free cash flow. We're able to do multiple things in parallel. First and foremost, you heard me talk for the last 30 minutes about how excited we are about the growth of our platforms. We're going to continue to invest to maximize those platforms. That's the most important thing that we can do. The second one is returning excess capital to our shareholders. We've demonstrated that consistently since 2009. And this year we announced another $1 billion share buyback and committed to $400 million of share buyback this year, of which we've completed more than $300 million. So you will see us continue to do that and continue to buy when we think that that is the right thing to do because the stock price is making it make sense for us. The third area is to continue to decrease leverage, and that will include the 27 and 28 convertible notes and taking care of those at maturity or at an appropriate time. And then the fourth one is continuing to look for M&A. Now, we will continue to look for assets that are a fit for our capabilities, ideally our high margin royalty type business, but our technology in some form of drug delivery that benefits patients, but also that pharma needs. And so it's a very careful matrix we look at. The bar is high. We feel very good about the growth potential of our current product. So we're not rushing into anything. We'll continue to take a very thoughtful and disciplined approach to that. But we have the possibility and the flexibility to do all of that in parallel because of the strength of the business.

Awesome. On that high note, thank you very much and all the best. Thank you.

Appreciate it. Thank you, everyone.